tv Nightly Business Report PBS February 7, 2011 7:00pm-7:30pm EST
>> tom: you may not know it by looking at your dinner plate, but we're in midst of a global food crisis driven by higher prices of wheat, corn and sugar. >> in the emerging world rising food prices are obviously causing unrest. you've seen it throughout northern africa, the arabian peninsula... >> susie: but economists say despite that unrest, there's still money to be made in emerging markets. you're watching "nightly business report" for monday, february 7. this is "nightly business report" with susie gharib and tom hudson. "nightly business report" is made possible by:
this program is made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt >> susie: good evening everyone. the stock-buying spree continued on wall street today. tom, the major averages are back to levels not seen in three years, but there are some concerns weighing on investors. >> tom: susie, food prices are one of them. dairy, sugar and cooking oil are just a few commodities that have surged to new highs. and those high prices and shortages are creating fears of unrest in some emerging markets.
>> susie: that's part of the reason behind the protests in egypt. so are the fears overblown, or is food inflation a serious concern for american investors? erika miller reports. >> reporter: you may be feeling the pinch of higher food prices at the grocery store, but it's nothing to compared to the crisis that is developing in some emerging market countries. floor trader art cashin warned a year ago that food inflation could be a major headwind for the stock market, and he is still worried about the situation today. >> it is a serious problem, particularly in many emerging nations. there, people spend 40% to 60% of their income on food. while it's a serious inconvenience for many of us in america, we spend far, far less on the food budget. >> reporter: according to the u.n's food and agriculture organization, global food prices hit a record high in january for the seventh straight month. prices are already above 2008 levels, which sparked riots around the globe.
recently, higher food prices have been among the many reasons for protests in egypt, tunisia and elsewhere. if you think surging food prices only affect the world's poorest people, think again. access to food is crucial to a country's economic, social, and political stability, so food shortages create serious concerns for investors. many analysts expect food prices will continue to climb due to extreme weather, tight supplies and growing demand. but economist brian levitt does not think the situation will get much worse. >> short of a repeat of the massive droughts we've seen or the massive flooding we've seen around the world, we would expect food prices to start to moderate and for investors that have a well diversified portfolio, they should continue on the path they've been. >> reporter: so he does not recommend long-term investors bail out of emerging market funds. >> the long-term secular story remains the emerging markets. that's the great long-term bull market, whether it's the great
demographic shift, this big rise in consumerism, urbanization around the world. >> reporter: but if there is a global food crisis, it could spell big trouble for investors in u.s. stocks. after all, many multinational firms rely on emerging markets for much of their sales. >> if those people see their budget cut back, they may not buy some of the products of made by the mulitnationals. so, we can see not only with the food stuffs, but also the other commodities, we can see profit margins get squeezed. >> reporter: a concern, yes. but not nearly as serious as lack of food to eat. erika miller, "nightly business report," new york. >> susie: we'll have more on high food prices and the markets in just a moment. and our food inflation coverage continues tomorrow. our word on the street is: "beginning," as in "you want to be at the beginning of the food chain when it comes to investing." >> tom: president obama says now is the time to invest in america. in a speech to the u.s. chamber of commerce, the president told business leaders the government
will work with them to make it easier to take money off the sidelines to hire and invest. but in return, he says, businesses have a responsibility to their workers, not just shareholders. >> as we work with you to make america a better place to do business, i'm hoping that all of you are thinking what you can do for america. ask yourselves what you can do to hire more american workers, what you can do to support the american economy and invest in this nation. >> tom: responding to the president's remarks, house speaker republican john boehner said "president obama has retooled his rhetoric, but not his job-destroying policies." >> susie: here are the stories in tonight's n.b.r. newswheel: stocks closed higher on deals and acquisitions. we'll detail them in a moment. the dow rose 69 points, the nasdaq added nearly 15 and the
s&p 500 up eight. as for volume, under 900 million shares on the big board and 1.8 billion on the nasdaq. >> susie: the week kicked off not only with monday morning quarterbacking, but it's also a big merger monday. danaher, the medical and industrial instruments maker, is buying beckman coulter, another medical testing instrument maker. it's a $6 billion deal. in another deal, ensco will pay $41.60 a share for offshore driller pride international. and aol is buying news blog service the huffington post for $315 million. tom will have more about all of those. federal regulators want top executives at large financial firms to wait at least three years before collecting their bonuses. the new rule is meant to discourage risky bets on wall street. the f.d.i.c. okayed it today, but it must still be approved by other regulators, including the federal reserve and securities and exchange commission.
and in egypt, things are getting back to normal. president mubarak still hangs on to power, but protesters say they will continue to demonstrate until he steps down. in cairo and alexandria, banks reopened today for the second day. egypt's stock market is expected to remain shut through the week and reopen for three hours of trading next sunday. it's been closed since january 27. >> tom: still ahead, last night's super bowl was the most- watched program in u.s. television history. which companies got their money's worth? >> susie: back now to our top story, high food prices and the markets. joining us now for more analysis, scott macdonald, senior managing partner and head of economic research at aladdin capital. president hi, scott, nice to see you. >> how are you doing. >> susie: very well. well, let's talk about the emerging markets. we is been hearing for a long time that this is where
the best growth opportunities are. and recently we've been hearing well, it's kind of risky between the food crisis and the political crisis, put it into perspective for us. >> well, i think you have to understand that starting off 1980s, 1990s emerging market-- merging markets went through structural changes, periods of crisis, debt rescheduling. we had the asian con tagan, '97, '98, the last decade early 2,000 were good decade force emerging markets. strong growth, reforms paid off. and investors found that there was an area of demographic growth as well as market growth. and they became very attractive. >> what about now. should investors avoid specific countries in the world. which ones are the most vulnerable? >> well, i think you've got a situation obviously in the middle east, north africa where it is shown that there is a certain brutalness in the political system that has lent itself to shaking up markets a bit. even though the u.s. market and the european markets
have shrugged it off t sits there as an issue where you have a cross-section between political pressure for change, a desire to change things like corruption but also you have problems with things like inflation where people see food prices going up, it puts them in difficult straits. there is a lot of frustration is so the middle east, north africa loom pretty large in that regard. >> susie: it's very hard for american investors to navigate through oul of this an there may be the sense maybe i should just bail on the emerging markets all together in my portfolio. >> well, i don't think that's the right strategy. on a long-term basis emerging markets have demographics, they will have strong economic growth there are going to be places to invest. the trick now for investors is that they have to do their homework. they went through a period where i don't want to say you could throw a dartboard, throw a dart in a dartboard and do well but in general are you able to play in emerging markets, do
relatively well. now you've got to sit back, recognize there are political risk. the food factor is to the going to go away any time soon. they have to be more savvy with it they still want to play emerge markets and do not necessarily want to be directly involved in emerging markets then they can play with large multinationals which are still probably going to navigate through these markets much better than a lot of individual investors. >> you know, scott, the u.s. markets have seemed to be unscathed during all of this unrest and uncertainty in egypt. what is it that could rattle investors? >> well, it really depends how big the problems occur in emerging markets. i mean the u.s. markets have benefitted, we will have around 3.5% real gdp growth this year. strong robust earning season. you've kicked the fiscal can of the responsibility down the road a couple of years. the issues that really sit here is if you end up with a major problem in one of the emerge markets t could
detail-- derail things. egypt, even though we have had common recent day, the big issue is what happens next. you still don't have a clear-cut idea of what is going to occur in egypt. and it is a big important geo strategically significant country. oil prices and commodities. >> a lot of questions looming. thank you so much for your insights. we appreciate you coming on the program. >> thanks. >> susie: we've been speaking with scott macdonald of aladdin capital.
>> well, as reported, tom, a solid day of gains on all of the market averages today. it looks like investors were less focused on egypt and earnings and more on all those acquisitions we just reported about. >> tom: you know, earnings in egypt clearly remain in focus but instead move together forefront really were all those acquisitions, and a lot of mergers hitting the tape. let's get everybody updated tonight in our market focus. >> tom: the stock market picked right up where it left off last week with buying. financial stocks led the rally today. bank of america gained almost 3%, very active today, leading the dow. american express and j.p. morgan each added about 2%.
meantime, loews was among those leading the broader financial sector. shares jumped more than 4%. volume doubled on this move to a new 52-week high. loews has been rallying steadily since its june low. loews fourth quarter earnings were much better than predicted, beating the street by 29 cents. investment income helped results. now, loews is a financial conglomerate. it owns 90% of insurer c.n.a. and a majority stake of diamond offshore drilling. loews says diamond has the size to compete with a new deep water energy driller combination. that combination is pride international and ensco. it was one of several deals we mentioned earlier. here's how the market reacted. pride shares shot to 16%, still about $2 below the buyout price.
shares dropped here back in the spring and summer thanks to the b.p. oil disaster, but today's rally takes it to a new 52-week high. the buyer, ensco, saw some selling, slipping 4%. just last week, the stock was at a new yearly high. while we're talking about energy, chesapeake staged a breakout rally, jumping 4% as volume tripled. it confirmed plans to sell some assets. and analysts expect it to use the money to pay down debt. that helped raise up its stock price. back to the mergers, medical gear maker beckman coulter jumped 10% with a big premium offer from danaher. this jump in december is when reports surfaced beckman was thinking about a sale. that came after shares where in the mid-40s due to recalling a faulty heart problem test.
in a sign the market likes the combination, even the buyer, danaher, saw its stock price increase-- up 2%. volume was more than triple its usual pace. aol meantime didn't fare as well in its merger news. shares sank to a six-month low. it will buy the huffington post website for $315 million. a trio of consumer stocks made some decent moves. discount retailer big lots shot up 15% on reports it may be considering a sale. j.c. penney rallied almost 6%. it has rolled out big touchscreens in its stores for customers to buy items not in stock. and ford added 2.5%. according to the "wall street journal," ford will boost vehicle production this quarter. and that's tonight's "market focus."
>> tom: sports, super models and swimsuits have not been such a booming business for time warner's "sports illlustrated" magazine in recent years. tonight's "beyond the scoreboard," our look at the business of sports, starts with a new effort to uncover new business. rick horrow is a sports business analyst and c.e.o. of horrow sports ventures. reasons first a new effort to uncover a-- 200,000 people went to that game watched it was a record,. >> as an honor for you and our friendship there is the official super bowl swag, wear it in good health. >> very nice, thank you so much coming from dallas, texas. all right this year let's
move to the swimsuit edition. due to hit the newsstands in a couple of weeks. trying something new for "sports illustrated" and time warner, marrying supermodels with auto models from nissan. a seven figure sponsorship deal, how does this most valuable franchise of time warner's publisher-- publishing return to its glory days. >> it's a match made in heaven. they needed a bump and they got it they are having readers put models into the contest with a fan vote and then choose their models over the next few months. and for nissan they wanted to stay ahead of.that and honda and this will be a way to do it. >> tom: this. >> this has been a big moneymakering over the years. historically about 95% of the swimsuit editions revenue comes from the old school print ads this wrer it is changing significantly. look how this pie chart changes. 55% only coming from print ads so what is the lesson for other sports media. >> you cut the pie a different way, diversify, diversify, diversify, in order to be successful you have to make sure that the
old model of the print ad is is up plemented by new media. >> the nfl season is over, certainly. next season still questionable with the labor negotiations under way. but los angeles has a new $700 million deal for stadium naming rights for a stadium that doesn't exist. here are the details for farmers insurance. farmers field is what they this may be called fwlu is still no stadium and no ffl team for los angeles. with all this considered s it a guaranteed big bet to win. >> some details, you see on the graphic no stadium, no team, but the bottom line is this is a perfect deal for aeg who did that deal, a brilliant move. and frankly it's so totally dependent on a team that if they get two teams in that stadium, the numbers, the pundits say it may go up to $1 billion the bottom line is the team is the linchpin but this proves and shows how the financing for the stadium could get put together. >> tom: certainly the team is the linchpin but does this set a new precedent for stadium naming right deals. >> quite clearly,, the old one, 400 million, city fields, this is way beyond
that, a creative positive deal. >> tom: you mentioned aeg which is the entertainment giant trying to put this deal together for los angeles it already owns and runs a number of different stadiums and a recentas it is a concert promoter. it wants to go head-to-head with ticketmaster and live nation in the ticketing business. so with that in mind, could it lower consumer fee force tickets? >> competition is always very good. justice department a of product. live nation and ticketmaster and aeg said we had a former relationship. we need to go out on our own. hence the deal with the outback. what they want to do is make sure that the choices are there and therefore the prices are lower. >> tom: now live nation's share price traded below $12 a share for 8 months or so. what does it need to do to defend the ticketmaster brand. >> they have to be creative. that is what competition is all about. diversify their product, offer more and better service. again, better for consumers. >> tom: we've got rick horrow, the c.e.o. of horrow sports ventures. >> susie: here's what we're watching for tomorrow: quarterly results from merck, walt disney and toyota. and as toyota releases its
earnings, the government is out with íts report on toyota's sudden acceleration problems. tomorrow, why is the dow surging and transport stocks lagging? we'll look at what this means for the economy. well that on-again, off-again rail project to build tunnels linking new york and new jersey may be on again. now amtrak wants to spend $50 million on design and engineering studies. the idea is to build two new rail tunnels under the hudson river. but the price tag for the whole project could run more than $13 billion. that's why new jersey's governor chris christie killed plans for the project months ago. >> tom: south america's biggest tourist event went up in smoke today, literally. fire ripped through warehouses in rio de janeiro that held the floats and costumes for the parade in the city's carnival. a year's worth of work was destroyed. fortunately, there were no serious injuries. the parade is a hallmark of one
responsible when it comes to money may be easier than you think. tonight's commentator has some ideas on how to do it. he's bill rodgers, professor at rutgers university. >> efforts to reduce the chances of a future financial crisis have focused on rescuing the economy and strengthening the oversight of financial markets. but greater emphasis needs to be placed on the economic literacy of our children. a wealth of resources exists. all states have curriculum requirements, and there are numerous websites. my favorite is a free rutgers university site called econkids.rutgers.edu. the concept behind the site is simple. economics professor yana rodgers and reading specialist shelby hawthorne developed a living catalog of children's literature that teaches a wide range of economic concepts that are linked to curriculum standards. you can click on a concept and obtain a list of the site's top five choices for acclaimed
children's books that use enjoyable stories to teach economics. the site profiles a new book each month, reviews new children's books and identifies their economic content. for sure, econkids.rutgers will not solve our debt problems. nor will it solve the sub-prime lending mess. but, econkids will help your children become savvier and smarter consumers, helping to ensure our nation's future economic security and competitiveness. i'm bill rodgers. >> tom: a decent game delivered big business for the companies shelling out millions of dollars to get their message out during last night's super bowl. one of the ads called most engaging came from struggling retailer best buy. >> what is that. >> what is a -- >> i don't know, kind of looks like a girl. >> tara may-tra is with us, vice president of audience, attracting some of the audience response.
well come-- welcome to nightly business report. >> so that best buy ad was a first-timer for a super bowl advertisement. did it get its money's worth. >> i would say so, first time advertiser coming in second place is a pretty good score. best buy you have had the right mix of i think celebrity as well as humor. in fact, if you look at the top ten ads that ranked within the scoreboard i would say that i think three of them actually had celebrities and if you count darth individual ter would be 4. >> tom: best buy certainly had the celebrities. your rankings are based upon engagement of viewers that used tivo to watch the game. but engagement may not necessarily mean an effective ad though, right? >> that's true. but which would argue that of the measures of effectiveness, engagement is your most important measure. if you don't have the engagement your chances of your ad being effective are pretty much slim to none. so it's the engagement that gets that viewer to stop and view the ad and then it's the creative and messaging of the brand to take it the
rest of the way through. >> to the point of a lack of engagement budweiser long time super bowl advertiser, again spending millions of dollars this year for anheuser-busch product bus it didn't rate well among tivo viewers. why do you think this was a wasted opportunity? >> well, we didn't see any beer ads or any movie ads in the top ten, actually. so usually movie studios and beer ads are pretty highly ranked. and this area they weren't there. i don't know if it was just the competitive edge of the other contenders. or perhaps where they were placing the ads. >> you know, lots always made about how much companies wind up shelling out for this television ad time and whether or not stakeholders and shareholders are getting a return on that investment. what is your research find in terms of the most valuable piece of air time broadcast time during the super bowl. when was it? >> well, for the second straight year we saw ads were the most effective and in the first half were rewatched much more son that
the second half. as the game got more interesting the ads took a backseat. >> took a backseat to the competitive gain that was going on in the field. we appreciate you sharing the insights and research with us. tara may-tra with tivo. >> tom: that's "nightly business report" for monday, february 7. i'm tom hudson. good night everyone, and good night to you too, susie. >> susie: good night tom. i'm susie gharib. good night everyone. we hope to see all of you again tomorrow night. "nightly business report" is made possible by: this program was made possible by contributions to your pbs station from viewers like you. captioning sponsored by wpbt captioned by media access group at wgbh access.wgbh.org